Medicare: Information Needed to Assess Adequacy of Rate-Setting Methodology for Payments for Hospital Outpatient Services
Highlights
Under the Medicare hospital outpatient prospective payment system (OPPS), hospitals receive a temporary additional payment for certain new drugs and devices while data on their costs are collected. In 2003, these payments expired for the first time for many drugs and devices. To incorporate these items into OPPS, the Centers for Medicare & Medicaid Services (CMS) used its rate-setting methodology that calculates costs from charges reported on claims by hospitals. At that time, some drug and device industry representatives noted that payment rates for many of these items decreased and were concerned that hospitals may limit beneficiary access to these items if they could not recover their costs. GAO was asked to examine whether the OPPS rate-setting methodology results in payment rates that uniformly reflect hospitals' costs for providing drugs and devices, and other outpatient services, and if it does not, to identify specific factors of the methodology that are problematic.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Centers for Medicare & Medicaid Services | The Administrator of CMS should gather the necessary data and perform an analysis that compares the types and costs of services on single-service claims to those on multiple-service claims. |
CMS used information from almost 84 million single and generated-single procedures to set the APC rates for services paid under Medicare OPPS for 2005 and used over 17 million individual claim line-items to set the APC rates for drugs and biologicals paid under OPPS for 2005. This compares favorably to the 2004 OPPS in which CMS used 44 million single and generated-single procedure claims to set payment weights for procedural APCs and used 7 million individual line-items to set APC rates for drugs and biologicals. CMS continues to seek ways to use as many of the claims for services paid under OPPS as possible.
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| Centers for Medicare & Medicaid Services | The Administrator of CMS should analyze the effect that the variation in hospital charge-setting practices has on the OPPS rate-setting methodology. |
CMS has nothing to add at this time to the 2004 comments that it submitted related to this recommendation. CMS believes that its previous response to this recommendation still stands and CMS has nothing further to add. The agency intends no further action.
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| Centers for Medicare & Medicaid Services | The Administrator of CMS should, in the context of the first two recommendations, analyze whether the OPPS rate-setting methodology results in payment rates that uniformly reflect hospitals' costs of the outpatient services they provide to Medicare beneficiaries, and, if it does not, make appropriate changes in that methodology. |
CMS has nothing to add at this time to the 2004 comments that it submitted related to this recommendation. CMS believes that its previous response to this recommendation still stands and CMS has nothing further to add and plans no additional action.
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